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Market Insider: Thursday Look Ahead

Bubbling oil prices are the stock market rally's new friend, for now.

Stocks fought back Thursday against a soft opening, with the help of oil, which continued its sprint higher on tighter-than-expected supply data. Oil finished the day 4.7 percent higher at $72.42 per barrel, giving it an increase of 8.5 percent in the last two trading sessions.

At the same time, lagging energy shares rose, pulling stocks higher. Exxon Mobil was up more than 2 percent, Chevron was up nearly 2 percent and Occidental was up nearly 3 percent. The energy sector was up close to 2 percent and was the best performing of the 10 S&P industry sectors. Year-to-date, the group is still slightly negative and is the third worst performer after telecoms and utilities.

The Dow was up 61 points or 0.7 percent to 9279, while the S&P 500 rose 6 points to 996. Higher oil prices are seen as a double-edged sword for stocks because they boost oil profit earnings and represent stronger growth, but they also can cut into consumption, depress an already weakened consumer and pressure corporate profit margins.

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Oil, too, was on the front burner in the global market debate about whether China's growth is slowing. On Wednesday, Platts released an analysis showing that China was cranking up its refineries and its demand for oil rose 4.2 percent in July from year ago levels.

"It held up technically, if you look at the charts," said M.F. Global vice president John Kilduff of the jump in oil prices. "The catalyst continues to be the weakening dollar, coupled with the fact that the Chinese continue to have record imports. That data you can't ignore."

Fears of a China slowdown have been playing big in its home market, as well as concerns that lending is constricting. Overnight Wednesday, the Chinese CSI 300 index fell to a point where the stock market decline was 20 percent since Aug. 8, putting it in bear-market territory. But traders are quick to point out the Chinese market is still 66 percent higher year-to-date and more than a 100 percent above its November, 2008 lows.

Thursday's focus will be on the U.S. weekly jobless claims data at 8:30 a.m.

"On an average basis, the number of claims in August is less than the number of claims in July, which was less than the average claims in the month of June. More importantly is these claims are coming down on a monthly basis and that is the most important thing in terms of the labor market right now," said Dan Greenhaus, chief economic strategist at Miller Tabak. Greenhaus said he expects claims of about 550,000.

Other data Thursday includes leading indicators and the Philadelphia Fed survey, both reported at 10 a.m. Fed officials and others should begin to gather Thursday ahead of the Kansas City Fed's annual symposium in Jackson Hole, Wyo. Fed Chairman Ben Bernanke speaks to that group Friday morning, but traders are watching for comments from other attendees to trickle out ahead of time.

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There are just a few earnings, including Gamestop, Heinz, Hormel, Ross Stores, and Sears. Gap and Intuit report after the bell.

Oil rose along other commodities, as the dollar slumped. The dollar fell 0.75 percent against the euro to $1.4235. Meanwhile, Treasurys gained. The 10-year yield, as a result, fell to 3.465 percent."

-- Questions? Comments? marketinsider@cnbc.com

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  • Patti Domm

    Patti Domm is CNBC Executive Editor, News, responsible for news coverage of the markets and economy.

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